Dow 30: IMF Lowered the U.S. Economic Growth Expectations for the Next Two Years amid Internal and External Economic Difficulties

Summary:

The median projection shows that the U.S. Consumer Price Index (CPI) could rise 8.8% year-over-year in June, the largest gain since 1981. The acceleration in inflation is likely to be reflected in higher gasoline prices and high food prices. In our view, the U.S. policy priority must be to relieve inflationary pressures quickly without causing an economic recession. For the Fed, formulating appropriate policies and measures to avoid a recession in the United States is becoming "increasingly challenging". Coupled with the Russia-Ukraine conflict, the pandemic, and the supply chain crisis, the economic recovery faces considerable headwinds.

SELL US30

Close Time

CLOSED

31051.70

Entry Price

30840.00

31130.00

48571.90 -263.55 -0.54%

783.0

Pips

Loss

30840.00

31130.75

Exit Price

31051.70

Entry Price

31130.00

I. Fundamentals

The median projection shows that the U.S. consumer price index (CPI) could rise 8.8% year-over-year in June, the largest increase since 1981. On a month-over-month basis, the index is expected to rise 1.1%, the third time in the past four months that it has risen by at least 1% from a month earlier.

Accelerating inflation can be seen in higher gasoline prices and persistently high food prices.

CPI Economic Research reports that national retail gasoline prices exceeded $5 per gallon in mid-June, contributing at least 0.5 percentage points to the CPI's month-over-month increase.

Oil prices, which had been rising long before Russia's invasion of Ukraine, explain President Joe Biden's dismal approval ratings and an upcoming trip to the Middle East - where he hopes to convince Arab leaders to produce more oil.

But oil prices have begun to fall this month, signaling that July CPI data will moderate. While inflation remains high, there have been signs of cooling as ballooning retail inventories have led to discount sales and weakened used car prices. Core CPI, which excludes energy and food, is likely to rise 0.5% in June from a year earlier, marking the lowest rate of increase in three months.

In addition, while inflation for online shopping slowed sharply, prices for everyday goods rose at a record pace. Overall online shopping inflation only increased by 0.3% year-over-year in June, well below February's record 3.6%.

While Fed officials have already implied a 75 basis point interest rate hike at their next meeting, lower inflation data in the coming months could lead to less aggressive policy action later this year.

On the other hand, the International Monetary Fund (IMF) recently lowered its U.S. economic growth forecast for this year and next, and raised its unemployment prediction through 2025, warning that an overall rise in inflation poses "systemic risks" to both the U.S. and global economies. The IMF executive board said on July 12 that U.S. GDP is expected to grow by 2.3 % this year, down from last month's forecast of 2.9 %.

The IMF now expects the U.S. unemployment rate to be 3.7 % this year, higher than its previous forecast of 3.2 %. The organization also expects unemployment to exceed 5 % in both 2024 and 2025.

In our view, the U.S. policy priority must be to relieve inflationary pressures quickly without causing an economic recession. For the Fed, formulating appropriate policies and measures to avoid a recession in the United States is becoming "increasingly challenging". Coupled with the Russia-Ukraine conflict, the pandemic, and the supply chain crisis, the economic recovery faces considerable headwinds.

II. Technical Analysis

2.1 Dow 30 Daily Chart

Dow 30: IMF Lowered the U.S. Economic Growth Expectations for the Next Two Years amid Internal and External Economic Difficulties_1

In the Dow 30 daily chart, bears dominate the market. The CCL shows an increase in short positions, and %K and %D form a death cross with the %K value of 40.

2.2 Dow 30 Four-Hour Chart

Dow 30: IMF Lowered the U.S. Economic Growth Expectations for the Next Two Years amid Internal and External Economic Difficulties_2

In the Dow 30 four-hour chart, bears dominate the market. The CCL shows an increase in short positions, and %K and %D form a death cross with the %K value of 37.

2.3 Dow 30-Hour Chart

In the Dow 30-Hour Chart, bears dominate the market. The CCL shows an increase in short positions and %K and %D from a death cross with the %K value of 33.

2.4 Dow 30 15-Minute Chart

In terms of the Dow 30 15-minute chart, the real body of the candlestick has broken below the 89-day MA. The CCL shows an increase in short positions and bears are dominating the market. The fast and slow trend lines form a death cross and still have room to run below. The OBV is turning down in the overbought zone. %K and %D also form a death cross with the %K value of 30.

Dow 30: IMF Lowered the U.S. Economic Growth Expectations for the Next Two Years amid Internal and External Economic Difficulties_5

Trading Recommendations

Go short on Dow 30 at highs in the short term today.

Entry price: present value

Take profit: 30840

Stop loss: 31130

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